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News from EPI Wages for the Vast Majority of Workers Stay Flat in 2014

American workers have seen little to no real wage growth in the past three-and-a-half decades, and 2014 is no different, according to a new study from the Economic Policy Institute’s Raising America’s Pay initiative. In Why America’s Workers Need Faster Wage Growth—And What We Can Do About It, economist Elise Gould finds that real (inflation adjusted) hourly wages fell for most Americans in the first half of 2014, compared with the same period in 2013.

Gould analyzes the past six months of wage data (adjusted for inflation) from the Census Bureau’s Current Population Survey Outgoing Rotation Group. Key findings include:

  • Wages have fallen in 2014 for high-wage earners and those with a college degree—groups with the lowest level of unemployment. This is evidence that the economy is far from full employment and shows that the Federal Reserve should not consider raising interest rates.
  • Wages for the broad middle class declined over the last year, as they have for most of the past 40 years—dismal wage growth has been a key contributor to income stagnation and growing income inequality.
  • The lowest wage earners (those at the 10th percentile) were the only group to not suffer declining wages over the last year. This can be attributed to legislated minimum wage increases in the first half of 2014 in states where 40 percent of U.S. workers reside.

“Despite a recovering economy and growing productivity, employers are not putting anything more in their employees’ paychecks. Over the past forty years, corporations, and their CEOs and lobbyists, have used public policy to stack the deck in their favor,” said Gould. “The only way to strengthen the middle class is to grow wages, and for that we need policies that deal workers a stronger hand.”

Gould suggests several policy changes that could strengthen workers’ leverage and lead to higher wages, including: raising the minimum wage, strengthening workers ability to form unions, cracking down on wage theft, expanding overtime provisions, and ending misclassification of employees as independent contractors.

This paper is part of EPI’s Raising America’s Pay project, a multiyear research and public education initiative to make wage growth an urgent national policy priority.